Jose Huizar Scandal Touching Major LA Real Estate Players [Updated]

The shadow hanging over L.A. City Councilman Jose Huizar since last November, when the the FBI raided his home and office at City Hall, has widened, according to a search warrant which became public last week and was covered by The Los Angeles Times—and it has become a scandal embroiling some of the most important figures in real estate.

Details of the warrant, filed with the United States District Court, named 13 people in the probe, which includes possible kickbacks, extortion, money laundering and bribery between the private sector and officials charged with green-lighting development projects throughout the city.

In addition to Huizar, who was stripped of his post of chair of the council’s Planning and Land Use Management committee in November, the document named two former aides of Mayor Eric Garcetti—Ray Chan, who once headed the L.A. Department of Building and Safety and Joel Jacinto, an appointee who resigned from his post as a member of the Board of Public Works last Friday—as well as Ninth District Councilman Curren Price, a senior aide to Council President Herb Wesson.

The warrant also requested information from “relating to development projects in and around Los Angeles that relate to foreign investors to include, but not limited to, Hazens [a subsidiary of Shenzhen New World Group], Greenland and Oceanwide.” The trio is behind some of the biggest commercial developments in Downtown Los Angeles, including a 77-story mixed-use skyscraper at the Marriott in Downtown Los Angeles at 333 South Figueroa Street by Shenzhen New World Group, the Luxe City Center project at 1020 South Figueroa Streetin South Park, Metropolis, a trio of luxury residential towers at 889 Francisco Street being developed by Greenland and $1 billion mixed-use development Oceanwide Plaza at 1101 South Flower Street at the Staples Center.

No one has been arrested or charged in connection with the investigation as it stands, with a spokesman for the FBI’s Los Angeles bureau telling Commercial Observer the agency could not comment on a pending investigation.

Vicki Podberesky and Mary Carter Andrues, attorneys for Huizar, stated in an email to CO, that the councilman “maintains an unwavering commitment to serving the constituents of District 14, and continues to work on behalf of the cultural, residential and commercial revitalization of Downtown Los Angeles.”

A spokeswoman for Price said, “Councilmember Price has not spoken to any investigators and is not aware of any of the matters listed in the warrant. However, he will cooperate fully in any investigation.”

The other individuals noted in the warrant did not return calls for comment.

An FBI agent carries a case from the home of Los Angeles Councilman Jose Huizar. FREDERIC J. BROWN/AFP/Getty Images

In December, TheLos Angeles Times reported that a federal grand jury had issued at least one subpoena seeking records involving lobbyist Morrie Goldman and Art Gastelum, the head of a Pasadena-based construction management firm. Goldman has represented companies behind some of the biggest development projects in Huizar’s council district, including the $1 billion Grand Avenue Project across from the Walt Disney Concert Hall and 6 AM, the Arts District project which would bring two 58-story skyscrapers to 6th and Alameda Streets. A subpoena is commonly issued by investigators seeking information and does not mean the recipients or those mentioned in them are targets of a probe.

As far-reaching as the investigation seems, Jill Stewart, the executive director of the Coalition to Preserve L.A., said the issue goes further than any single council member, the mayor or the planning commissions, seeing an endemic problem with the way city officials work with commercial developers.

“What we’ve been saying since 2016 is that there is a pay-to-play system, a secret shadow government if you will that has its main debates behind closed doors directly with the developers, meetings that no members of the public can get. It’s become corrupt. In Los Angeles; we’re talking about billions of dollars sloshing around and people building skyscrapers and huge projects that ignore the local zoning, the community plan, the general plan,” she said. “There is no plan anymore in Los Angeles. Money is the plan.”

Her organization was behind the defeated Measure S on the 2017 ballot, which sought to put a two-year moratorium on building projects that require zone or other changes to city rules.

The problem, she said, surpasses just commercial properties Downtown, citing a tally of alleged “pay-for-play” development citywide. The coalition is filing a 30-page document with the Los Angeles County civil grand jury shortly to take a broader look at L.A. officials, not just those listed in the warrant, who she said “routinely take money and are lobbied from developers.”

Previous research into meetings between commercial developers and public officials from 2013 through 2016 and the projects that were approved gave her pause.

“The focus and discussion has been about downtown, but everywhere you look what would normally be considered illegal buildings are being built and pushed into Los Angeles,” she said, citing 12 projects throughout the county from Hollywood to the West Valley that were initially debated behind closed doors during that time period.

“Every one of them involved private meetings with city council members. The mayor claims that L.A. is transparent. It’s completely a lie,” she said, before adding that she found Garcetti the least open with such negotiations among the city’s recent top officials.

In a statement provided to CO in response, Garcetti said, “I’ve got zero tolerance for any unethical behavior in City Hall. Angelenos deserve public servants who bring integrity to everything they do in and outside of City Hall—and that will always be my demand of anyone who serves.” He declined further comment on the FBI investigation and the resignation of Jacinto.

Whatever comes of the FBI case, Frank v. Zerunyan, professor of the practice of governance and director of executive education at the USC Sol Price School of Public Policy, said even the suggestion of wrongdoing is harmful for public-private partnerships.

“It’s never good when potential crimes are being investigated by the FBI, especially in the context of relationships between the government and the private sector,” he told CO. “There’s already a lack of trust between them, which becomes more accentuated. Even with [just] innuendo that there is a crime committed or any kind of conduct unbecoming or unethical, it’s not helpful for the relationship between the public and private sector.”

“When you have these kinds of questionable events that occur, it reduces the trust of one sector over the other and it really scares the good ones. They don’t want to be involved. There are plenty of projects everywhere in the world. They do not need to be involved in a project that has any kind of shade involved.”

Zerunyan, a former three-term mayor and still-serving council member in the City of Rolling Hills Estates, who also acted as chair of the Planning Commission, said there are clear guidelines for elected officials with respect to gifts and donations as outlined in the state’s Sunshine Laws. He said they were required to list any gifts or donations with the California Fair Political Practices Commission (FPCC).

“If they violated the laws of the FPCC, there is an entire division of the L.A. County District Attorney General’s office that prosecutes these cases. God forbid these folks were involved in any pay-for-play schemes, it’s very bad news for them. They lose their offices, they will be prosecuted and can even serve jail time. It’s pretty harsh,” he said.

When asked what the likely impact of the investigation could be on commercial development projects noted or in the pipeline, he said even if a private individual had given gifts or donated to causes tied to public officials, but failed to disclose those, they are not subject to the same state laws.

“You would need to find other crimes to go after them. In their case, it’s a free country. They can donate to campaigns as long as it’s within campaign limits and money to various organizations,” he said. “I can also envision a not-so-honest part if those donations were done for quid pro quo, but you would have to prove that.”

Update: The copy has been updated to reflect that Morrie Goldman and Art Gastelum were not named in the FBI warrant, which CO initially misreported.